How Does the Board of the Company Work?

In a publicly-traded corporation the board is the group that decides what the business does. Its members are elected by shareholders (the owners) to represent them and care for their interests. The board hires executives who manage day-to-day operations in site accordance with the instructions of the board.

A major role of the board is to make sure that a company doesn’t risk its investors or shareholders assets. It sets guidelines for dividends, approves or rejects hiring or firing high-level managers, changes corporate regulations, and conducts an annual shareholders’ meeting.

The board is typically composed of inside directors who also operate as officers of the company and outside directors who don’t hold executive posts. The chairman of the board oversees meetings, sets agendas, and delegates tasks among the members. Some boards also have standing committees such as the audit and compensation committees. These committees usually have a specific scope and are mandated by law or stock exchange listings.

Boards have to balance the need review the information they have on a regular basis, while also balancing their responsibility to concentrate on the big picture and not on day-to-day management. It is essential for a board to recognize which of its responsibilities it must and wants to perform themselves, and which it should delegate. Boards often develop the list of reserved powers to clearly define what activities are the sole responsibility of the board, and those that may be delegated to the senior management.

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